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Gold likely to climb back to $1,350 an ounce by the end of 2018

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NEW YORK: Investors will have to wait a few more weeks before the gold market is ready to shake off its summer lulls, according to one gold market analyst.

In an exclusive interview with Kitco News, George Milling-Stanley, head of gold investments at State Street Global Advisors, said that he is expecting buying momentum to pick up by the end of September after the Federal Reserve raises interest rates for a third time this year and physical demand from important gold consumer nations increases in preparation for important holidays.

Gold’s summer doldrums can’t end fast enough as the market is caught in a four-month downtrend. However, looking ahead, Milling-Stanley said that the market could recover just as quickly as it sold off. He added that gold prices could climb back to $1,350 by the end of the year, but said that the first hurdle comes in at $1,250 an ounce.

“I think we could see $1,350, but it depends on how quickly momentum builds in the marketplace,” he said. “I will be happy to see prices above $1,250 as that has been the mid-point of the trading range we have been in since Mid-2013,” he said.

Milling-Stanley’s comments come as gold prices are holding above critical support at $1,200 an ounce. Gold prices have dropped from a recent two-week high as the U.S. dollar attracts new interest in the midst a growing currency crisis in emerging markets.

Some investors have been optimistic that the growing emerging market uncertainty will support gold prices by forcing the Federal Reserve to stop raising interest rates. But Milling-Stanley said he remains unconvinced that this could shift U.S. monetary policy.

“The Federal Reserve runs its policy for the benefit of its own country,” he said. “The U.S. economy is at the top of the Fed’s agenda and because of that we should see a rate hike in September and fourth rate hike in December.”

Currently, markets are pricing in a more than 90% chance of a September rate hike and a 70% chance of a fourth rate hike at the end of the year.

Milling-Stanley added that confidence is falling that the U.S. central bank will continue to raise interest rates past 2018. He explained that inflation pressures are still not roaring higher, which suggests limited economic growth moving forward. Early Thursday, the U.S. Department of Commerce said that its Core Personal Consumption Expenditures Index, the Federal Reserve’s preferred inflation measure rose to 2% for the first time since 2012.

Looking at emerging markets, Milling-Stanley stated that global gold demand could pick up as consumers buy the yellow metal to combat the ongoing debasement in their currencies.

“I think we will continue to see good solid global demand for gold through the rest of the year,” he said.

Milling-Stanley also said that he sees gold prices pushing higher late in the year as investors pay more attention to geopolitical turmoil as the U.S. quickly approaches the November mid-term elections.

“According to political pundits, there is a very real possibility of change in both the House and the Senate,” he said. “Investors have been desensitized to geopolitical risk; but, for the remainder of the year I see this having greater focus.”

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